How Scholarships Work

In order for someone to give you money for school, you must be doing at least something well. Merit scholarships are the ones that come to mind when you think of the general idea of a scholarship -- the money awarded to the girl who got a perfect SAT score, the class president who's also a virtuoso violinist or the boy who spends 30 hours per week working in a soup kitchen. These scholarships are for the leaders of tomorrow: the brilliant, the talented, the dedicated and, occasionally, the cutthroat.

There are two reasons merit-based scholarships are awarded. The first is to recognize that the most talented people aren't necessarily going to come from socioeconomic backgrounds that can afford the best education. Merit-based scholarships offer an opportunity for truly talented minds to blossom rather than to just slip through the cracks. As former Vice President Dan Quayle once famously said on the subject, "What a terrible thing it is to lose one's mind." That may not sound quite the way he meant it, but his heart was in the right place.

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Merit-based scholarships also benefit the community. We all win out when the math genius is working on theorems at the Massachusetts Institute of Technology instead of mopping the floors. Wasted talent isn't just something that hurts individuals -- it hurts the community when people aren't living up to their potential. States, for instance, all offer merit-based scholarships for in-state students as a way to make sure that the talent stays at home, and businesses offer merit-based scholarships partly to foster a strong relationship with incoming talent.

There are literally tens of thousands of merit-based scholarships out there. Some measure merit more conventionally, like the National Merit Scholarship Program, which selects their recipients based on their PSAT scores. Others, like the Arts Recognition and Talent Search and Project Imagine, award money based on potential and exceptional talent in the fine arts.

Finally, there are thousands of contests that award scholarships. These, however, can be the most competitive. For example, the National Geographic Society offers a $25,000 scholarship for first place in their Geography Bee, but winners have to beat out literally millions of other applicants. Likewise, the Intel Science and Engineering Fair gives out $3 million every year for exceptional science, math and engineering projects.

But wait. How does that scholarship money actually get used? Next up is the truth behind where your scholarship money goes.